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taxes

Tax Rates & Australian Tax Brackets - Guide

By QuickBooks Australia

Published on May 6, 2024

Taxes are an inevitable part of life for residents of Australia. Whether your income comes from a foreign source or an Australian one, if you live in Australia you are subject to Australian tax rates. Non-residents are subject to Australian tax rates for the income earned in Australia.

Depending on your age or residency status a different tax rate may apply. This article explores the different tax rates that could apply to you and how you can calculate the amount of tax you have to pay to the Australian Taxation Office (ATO).

Australian Residents' Tax Rates

The tax brackets for residents below are set through 30 June 2024.

AUD Taxable Income	Tax on this income	Income Tax on Excess
Under $18,200	0	0
Between $18,201 and $45,000	0	19%
Between $45,001 and $120,00	$5,092	32.5%
Between $120,001 and $180,000	$29,467	37%
Over $180,000	$51,667	45%

The tax-free threshold is $18,200. You do not need to pay if you earn $18,200 or less. But once you exceed the threshold you pay a tax rate of 19% until you earn $45,000. Sole traders are subject to the same tax rates as individual taxpayers.

The Medicare levy surcharge is not factored into this tax table. The 2% Medicare levy applies to the majority of residents. You can add 2% to include the medicare levy charge if you want to see the most accurate figures. For higher-income taxpayers, there's an additional levy of between 1 and 1.5%. There are also special rates relating to the unearned income of children under 18. Additionally, tax offsets are not included in the table.

Foreign Residents' Tax Rates

If you are a foreign resident for the purposes of tax, the below rates apply to your income for the financial year 2022 to 2023.

AUD Taxable Income	Tax on Column One
Up to $120,000	32.5 for every dollar earned
Between $120,001 and $180,000	$39,000, plus 37 cents for every dollar over $120,000
Over $180,000	$61,200, plus 45 cents for every dollar over $180,000

Children Under the Age of 18 Tax Rates

Under 18-year-olds are subject to special rates if they are in receipt of unearned income. If you are in employment or own a business, you are liable to pay the same tax rates as an adult earner. This is also true of income from an estate or Centrelink payments.

Working Holiday Makers Tax Rates

The amount of tax payable for working holiday makers is different again than other income tax rates. A working holiday maker will have one of two visa subclasses – either the 417 for working holiday or the 462 for work and holiday. Taxes in Australia for working holiday makers for the financial year 2022 to 2023 are:

AUD Taxable Income	Tax on Column One
Up to $45,000	15%
Between $45,001 and $120,000	$6,750, plus 32.5 cents for every dollar over $45,000.
Between $120,001 and $180,000	$31,125, plus 37 cents for every dollar over $120k
Over $180,000	$53,325, plus 45 cents for every dollar over $180k

If your employer is registered with the ATO as a working holiday maker employer they will withhold tax at a rate of 15% for the first $45,000, and the balance is taxed at the ordinary rate.

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Tax Calculators & Tables

A tax calculator is the easiest way to calculate the correct income tax rates. While you could attempt to work out the marginal tax rate, payroll tax and capital gains on your own to work out your income tax offsets, a calculator will provide you with more accurate results when it's time to file your tax returns at the end of the financial year. The Australian Taxation Office (ATO) provides calculators that will take your education loan repayments, offsets, tax credits and Medicare levies surcharges into account.

You can also use tax tables to calculate tax rates in Australia.

Calculating Tax

How do you calculate Australian tax rates to determine what to pay tax-wise? You can calculate tax by determining what rate applies to you from the tax tables above, for example:

If you are an Australian resident and earn $50,000. The rate which applies is $5,092 plus 32.5 cents for each dollar over $45,000. This translates to you paying $5,092 for your earnings up to $45,000. The remaining $5,000, is subject to the higher rate of 32.5%, which amounts to $1625. Therefore, the total tax payment for a $50,000 earner is $6,717.

Many people falsely believe that your whole income is subject to a higher tax rate once you reach a new tax bracket. However, you only pay the higher tax rate on the income that exceeds the lower rate's threshold.

The tax-free threshold means you are not liable to pay taxes on the first $18,200 you earn. The tax-free threshold is set to remain at this level until the 2024-2025 financial year. At the end of every financial year, you need to file a tax return and in your return, you need to declare your assessable income.

What is assessable income?

Assessable income includes your salary, your bonuses, leave pay, and commissions. Assessable income also includes annuities, super funds, government payments, investment income, income from a business, trust or partnership, foreign income, and crowdfunding income.

Deductions & Levies

You can reduce your assessable income by applying eligible deductions, which will reduce the amount of tax you owe. Common deductions include work-related expenses, such as a vehicle, travel, uniform, and dry-cleaning. There are additional deductions available for those who regularly work from home, from the cost of running your home to phone and internet to office supplies and furniture, and tools and equipment. You may also be able to deduct overtime meals, self-education, union fees, and other work-related expenses. If you pay a professional to manage your tax affairs, you can claim the cost back. You can also claim gifts, donations, dividends on investments, and personal super contributions.

Medicare provides residents in Australia with universal health care and it is partially funded through the 2% Medicare Levy. All residents pay 2% of their taxable income to Medicare. It is generally the employer's responsibility to withhold this. Earners with income less than $23,226 are exempt. And earners with income less than $29,033 pay a reduced amount.

QuickBooks Software Can Help

With QuickBooks Tax Software, you can easily and automatically calculate tax rates. There is no need to panic about getting it right when you have a program that can do the heavy lifting for you.

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Tax Rates & Australian Tax Brackets - Guide

Australian Residents' Tax Rates

Foreign Residents' Tax Rates

Children Under the Age of 18 Tax Rates

Working Holiday Makers Tax Rates

Grow Your Business with QuickBooks

Tax Calculators & Tables

Calculating Tax

What is assessable income?

Deductions & Levies

QuickBooks Software Can Help

Related Articles

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